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 The survey of 125 institutional investors from across the globe also
found that nine of the 130 banks being tested were expected to fail,
with capital shortfalls most likely at Italian, German and Greek
banks, according to a document circulated by Goldman Sachs on
Tuesday night.
The ECB is examining whether banks have properly recognized losses
in a bid to finally draw a line under doubts about euro zone
lenders' balance sheets before it becomes their supervisor on Nov.
4. Results are expected around Oct. 17.
Producing a result that is in line with market expectations is key
for the ECB, since previous rounds of EU bank tests in 2010 and 2011
were roundly discredited for capital demands and failure rates that
were far less than what investors deemed reasonable.
"The ECB is clearly perceived to have handled the process well thus
far, resulting in an increase in credibility assigned to the
exercise," Goldman's report noted, pointing out that 89 percent of
investors now expect the tests to be credible, up from 70 percent in
a previous Goldman survey in October.
Expectations of an "extreme" outcome that would require banks to
raise over 100 billion euros fell from 18 percent in October to 8
percent now, but investors' average expected capital demand is now
23 billion euros higher than in October
The 51 billion euros investors say is needed takes account of
capital that banks have already raised, including 47 billion euros
they have raised since October. The ten banks seen as most likely to
fail include six that have already raised capital.
Three quarters of investors surveyed said they expected the exercise
to be positive for bank valuations, with banks set to "outperform"
the broader equities market once the results are announced.
Euro-zone banks have traded at lower valuations than their U.S.
peers in recent years.
GREEK, CEE AND AUSTRIAN BANKS IN FOCUS
Perceptions of Greek, central and eastern European and Austrian
banks have deteriorated most since October, the survey said, while
investors' views on Spanish banks have improved. Their shares did
not suffer on Wednesday, when the benchmark Stoxx Europe 600 banks
index was up 1.32 percent by 1119 GMT.
Greek and Italian banks are seen as most likely to fail, according
to the survey. Italy's Monte dei Paschi, seen by investors having
the highest risk of failure, declined to comment as did Banca
Popolare di Milano, the sixth most likely to fail, and Banco
Popolare, the fourth most likely to fail.
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Greece's Piraeus, Eurobank and Alpha Bank were also among the top
ten most likely failures along with Germany's Commerzbank,
Portugal's BCP, Austria's Raiffeisen Zentralbank, and Spain's Banco
Popular Espanol.
“There have been several reports out recently with different views
on the outcome of the exercise, in this phase there is speculation
in the market," a senior Greek banker said. "Greek banks have high
capital buffers as a starting point.”
Fokion Karavias, senior general manager at Eurobank, the country’s
third-largest lender by assets, told Reuters his bank was
participating in the exercise "with confidence”, while Alpha and
Piraeus declined to comment.
Commerzbank said it does not comment on individual studies and
referred to a statement by finance head Stephan Engels made when the
bank published its quarterly results on Aug. 7 who said the bank
felt "well positioned to pass these tests".
Spain's Popular declined to comment but had previously said it would
pass the tests. Raiffeisen said it was "most confident" that the
bank will pass the stress test. BCP declined comment.
(Reporting by Laura Noonan in London; Additional reporting by Tom
Atkins in Frankfurt, Silvia Aloisi in Milan, Sarah White in Madrid,
Mike Shields in Vienna, Filipa Cunha Lima in Lisbon and George
Georgiopoulos in Athens.; Editing by Leslie Adler and Susan Thomas)
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